What is CSAS-1?
The Auditing Standard on Audit Engagement (CSAS-1) is applicable to the Practicing Company Secretaries (PCS) as defined in the Company Secretaries Act, 1980 who undertake audit assignments envisaged under the Companies Act 2013 or Securities and Exchange Board of India (SEBI) Act 1992, or any other law prevailing in India. It is effective for Audit Engagements on or after 1st April 2021.
When do I need an audit?
An Audit can be mandated by an Act , by the Statute, or by a Court/Tribunal or Regulatory Authority. On the other hand, an entity can entrust a PCS with an audit assignment on a voluntary basis for its internal control and management purposes.
Following is an illustrative list of Audits which may be undertaken by a PCS under various Statutes:
Secretarial Audit as mandated by Section 204 of Companies Act 2013
Secretarial Audit as mandated by Section 24A of SEBI (LODR) Regulations 2015
Internal Audit as mandated by Section 138 of Companies Act 2013
Audit of Depository Participants as mandated by Section 76 of SEBI (Depositories and Participants) Regulations 2018
Internal Audit of Stock Brokers as per SEBI circular no. MIRSD/DPSIII/Cir-26/08 for SEBI (Stock and sub-broker) Regulations 1993 ...etc.
What is the Audit Engagement Process like?
I. Pre-Engagement Meeting
Before accepting the audit, the Auditor is likely to have a meeting to discuss the terms of engagement, prior year audit findings and conclusions, appropriateness of reporting framework, understanding Auditee's business operations and environment including internal control systems, commercial terms of the audit and the timelines and milestones, if any, for conducting the Audit and submission of the Audit Report.
The Auditor will disclose now, if any, 'Conflict of Interest' with the Auditee.
The Auditor shall be under 'Confidentiality Obligation' during the pre-engagement meeting.
II. Appointment
The Auditor shall submit a 'Certificate of Eligibility' to the Board/Appointing Authority confirming eligibility for appointment as Auditor.
The Auditor shall obtain an 'Audit Engagement Letter' along with a copy of the Resolution ( in case of Company Auditee).
The Auditor shall then provide Acceptance to the Appointing Authority. The auditor may give Acceptance to undertake the Audit either on the copy of the Audit Engagement letter or through a separate letter or through an email.
III. Communication to the Predecessor or Previous Auditor:
It is part of Auditee's responsibility to provide details of the Predecessor or Previous Auditor, so as to enable proposed Auditor to communicate with the Predecessor or Previous Auditor.
Auditor shall communicate with the Predecessor in such manner as to retain positive evidence of the delivery of the communication such as letter sent by Registered Acknowledgement Due, or by Courier, or by hand or through an email.
Glossary
Substantial Conflict of Interest
The Auditor shall not have any substantial conflict of interest with the Auditee. Any conflict of interest (other than substantial conflict of interest) must be disclosed by the Auditor before accepting the Audit Engagement or as soon as the Auditor becomes aware of the same, as the case may be.
Following cases shall be construed as Substantial Conflict of Interest:
Auditor holds more than 2% paid up capital or shares of nominal value of Rs. 50,000
Auditor is indebted to to the Auditee for an amount exceeding Rs. 5,00,000 (other than that arising out of an ordinary course of business of the Auditee)
Indebtedness that may seriously impair the independence of the Auditor, irrespective of the amount
Auditor was in employment of the Auditee during immediately preceding 2 years.
Confidentiality Obligation
The Auditor shall not disclose the information obtained during the course of audit without proper and specific authority or unless there is a legal obligation or duty to disclose.
The Auditor shall also ensure that reasonable procedures and safeguards are being followed to prevent unauthorised access to such confidential information.
(This Article intends to educate businesses on what to expect initially, when entering into Audit Engagements with a PCS. Opinions if any,contained in the article, are strictly personal to the author and should not be considered as legal,financial or technical advice)
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